Question: What Does Cash Rate Mean?

The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank to meet the dual mandate specified in the Remit to the Monetary Policy Committee.

What is the official cash rate mean?

What is the Official Cash Rate? The Official Cash Rate (OCR) is the interest rate set by the Reserve Bank to meet the dual mandate specified in the Remit to the Monetary Policy Committee.

How does the cash rate work?

The policy involves setting the cash rate, which is the interest rate banks charge each other on overnight loans. The cash rate influences other interest rates in the economy, affecting the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation, the RBA explains on its website.

What happens if the cash rate increases?

When the Reserve Bank lowers the cash rate, this causes other interest rates in the economy to fall. Lower interest rates stimulate spending. More generally, estimates suggest that it takes between one and two years for changes in the cash rate to have their maximum effect on economic activity and inflation.

What is the overnight cash rate?

The Interbank Overnight Cash Rate (Cash Rate) is the Reserve Bank Board’s operational target for monetary policy. It is calculated as the weighted average of the interest rate at which overnight unsecured funds are transacted in the domestic interbank market (the cash market).